PETALING JAYA: Analysts are maintaining their “overweight” stance on the consumer sector as they believe current valuations have largely priced in near-term concern of rising costs, while underappreciating the sector’s defensive earnings characteristics.
TA Research in a report said that it expects domestic consumption in 2026 to remain broadly resilient, underpinned by a stable labour market, civil servant wage adjustments, and ongoing fiscal support measures, including targeted cash assistance and initiatives outlined under Budget 2026.
Additionally, relatively benign credit conditions and sustained household spending on essential goods should continue to anchor demand for staple food products, the research house said.
TA Research noted that while Malaysia’s macro outlook remains sensitive to fluctuations in global energy prices, downside risks are partially mitigated by its status as a net energy exporter, which provides a natural hedge via stronger commodity-linked export revenues and currency support.
Furthermore, targeted fuel subsidy mechanisms help cushion the immediate impact of cost inflation on consumers, thereby moderating demand erosion and smoothing pass-through dynamics across the value chain, TA Research said.
Hence, it said consumer staples companies remain well-positioned to navigate the current environment, supported by their pricing power, entrenched distribution networks, and inelastic demand profiles.
TA Research added that these factors enable selective cost pass-through and margin preservation, reinforcing the sector’s appeal as a defensive earnings play amid heightened geopolitical uncertainty and potential risk-off sentiment.
“Accordingly, we reiterate our ‘buy’ recommendations on all food and beverage names under our coverage, premised on earnings resilience and potential for sector rotation into defensives.”
